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Category: Hershey's (HSY)
Date: 8 November 2020 Stock price of Hershey (HSY): $149.40 We take a look at the 3rd quarter 2020 earnings report of Hershey (HSY), one of the largest chocolate producers in North America and a seller of various confectionary items across the world. For the quarter the group reported sales of $2.29 billion and net income of $447.3 million.
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Michele Buck, The Hershey Company President and Chief Executive Officer - We are continuing to focus on executing with excellence, investing in the business, and advancing our strategic priorities to deliver a strong fourth quarter and position us well for 2021. "
More About Hershey's
The Hershey Company was incorporated under the laws of the State of Delaware on October 24, 1927 as a successor to a business founded in 1894 by Milton S. Hershey. The Hershey Company and its wholly-owned subsidiaries and entities in which it has a controlling financial interest, unless the context indicates otherwise. Hershey is a global confectionery leader known for bringing goodness to the world through chocolate, sweets, mints, gum and other great tasting snacks. We are the largest producer of quality chocolate in North America, a leading snack maker in the United States and a global leader in chocolate and non-chocolate confectionery. We market, sell and distribute our products under more than 80 brand names in approximately 85 countries worldwide.
Overview of Hershey's 3rd quarter 2020 earnings
Third-Quarter 2020 Financial Results Summary
- Consolidated net sales of $2,219.8 million, an increase of 4.0%.
- Organic, constant currency net sales increased 3.8%.
- The net impact of acquisitions and divestitures on net sales was a 0.8 point benefit, while foreign currency exchange was a 0.6 point headwind.
- Reported net income of $447.3 million, or $2.14 per share-diluted, an increase of 39.0%.
- Adjusted earnings per share-diluted of $1.86, an increase of 15.5%.
Hershey's management commentary on their 3rd quarter 2020 earnigs report
HERSHEY, Pa., Nov. 6, 2020 /PRNewswire/ -- The Hershey Company (NYSE: HSY) today announced net sales and earnings for the third quarter ended September 27, 2020.
"We had a strong third quarter, with accelerated reported net sales growth of 4%, adjusted diluted EPS growth of more than 15% and confectionery share gains across markets, including an almost 190 basis point gain in the U.S. Our core U.S. business remains healthy as consumers reach for small treats during the pandemic, and our decision to lean into Halloween ahead of the season supported consumers' desire to find new and creative ways to celebrate safely. We also saw sequential improvement in the areas of our business hit hardest by COVID-19, including our international markets, owned retail locations and food service business," said Michele Buck, The Hershey Company President and Chief Executive Officer. "We are continuing to focus on executing with excellence, investing in the business, and advancing our strategic priorities to deliver a strong fourth quarter and position us well for 2021."
"We had a strong third quarter, with accelerated reported net sales growth of 4%, adjusted diluted EPS growth of more than 15% and confectionery share gains across markets, including an almost 190 basis point gain in the U.S. Our core U.S. business remains healthy as consumers reach for small treats during the pandemic, and our decision to lean into Halloween ahead of the season supported consumers' desire to find new and creative ways to celebrate safely. We also saw sequential improvement in the areas of our business hit hardest by COVID-19, including our international markets, owned retail locations and food service business," said Michele Buck, The Hershey Company President and Chief Executive Officer. "We are continuing to focus on executing with excellence, investing in the business, and advancing our strategic priorities to deliver a strong fourth quarter and position us well for 2021."
2020 Full-Year Financial Outlook
The Hershey Company withdrew its fiscal 2020 guidance on April 23, 2020. While the operating environment continues to evolve, the company is reinstating full-year guidance based on current visibility into sales and costs for the balance of the year.
Full-year reported net sales are expected to increase around 1.0%. This reflects a 2 point headwind from COVID-19 in our International & Other segment. The net impact of acquisitions and divestitures is estimated to be a 0.5 point benefit to net sales growth4, and the impact of foreign currency exchange is anticipated to be a 0.5 point headwind based on current exchange rates.
Full-year reported earnings per share-diluted are expected to be in the range of $6.03 to $6.11, an increase of 10.0% to 12.0% versus 2019. Full-year adjusted earnings per share-diluted are expected to be in the range of $6.18 to $6.24, an increase of 7% to 8% versus 2019.
The Hershey Company withdrew its fiscal 2020 guidance on April 23, 2020. While the operating environment continues to evolve, the company is reinstating full-year guidance based on current visibility into sales and costs for the balance of the year.
Full-year reported net sales are expected to increase around 1.0%. This reflects a 2 point headwind from COVID-19 in our International & Other segment. The net impact of acquisitions and divestitures is estimated to be a 0.5 point benefit to net sales growth4, and the impact of foreign currency exchange is anticipated to be a 0.5 point headwind based on current exchange rates.
Full-year reported earnings per share-diluted are expected to be in the range of $6.03 to $6.11, an increase of 10.0% to 12.0% versus 2019. Full-year adjusted earnings per share-diluted are expected to be in the range of $6.18 to $6.24, an increase of 7% to 8% versus 2019.
Hershey's (HSY) stock price history over the last 5 years
The image below, obtained from Google, shows the stock price history of Hershey's (HSY) over the last 5 years. And it's been a pretty good time for Hershey's stockholders. 5 years ago the stock of Hershey's was trading at around $84 a stock and its currently trading at $149.90. That's a decent return of 77.8% provided to Hershey's stockholders over the last 5 years.
The stock of Hershey's is trading at a lot closer to its 52 week high than it is to its 52 week low, which is a clear indication that the short term sentiment and momentum of Hershey's stock is positive at this point in time.
The stock of Hershey's is trading at a lot closer to its 52 week high than it is to its 52 week low, which is a clear indication that the short term sentiment and momentum of Hershey's stock is positive at this point in time.
Hershey's (HSY) stock vs Nestle (SWX: NESN) over the last 5 years
The image below shows the stock price performance of Hershey's (HSY) and Nestle (NESN) over the last 5 years. While they are listed on different stock exchanges on different continents they are direct competitors in the chocolate and confectionary space. The summary below shows the stock price performance of these two stocks over the last 5 years:
- Hershey's: 77.8%
- Nestle: 44.4%
Stock valuation of Hershey's (HSY)
So based on Hershey's 3rd quarter 2020 earnings report, what do we value the group's stock at? Based on the earnings report our stock valuation model provides a target price of $110.30 per Hershey's stock. We therefore believe the stock of Hershey's is overvalued at its current price of $110.30
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price, which in this case is $110.30 . Therefore a good entry point into the stock of Hershey's we be at $99.30 or below.
Since the stock of Hershey's is trading at well above our suggested entry point we rate the stock of Hershey's as a sell
We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price, which in this case is $110.30 . Therefore a good entry point into the stock of Hershey's we be at $99.30 or below.
Since the stock of Hershey's is trading at well above our suggested entry point we rate the stock of Hershey's as a sell
Next earnings release of Hershey's
It is expected that Hershey's (HSY) will release their 4th quarter 2020 earnings report in early February 2021
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